Court Outlaws Taking Advantage of Unpaid Interns

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Last week, a federal judge in New York ruled that Fox Searchlight Pictures, Inc. broke state minimum wage laws and federal labor law when it didn't pay its interns, Eric Glatt and Alexander Footman, for their work on the production of the film Black Swan.

Glatt was an unpaid accounting clerk for Fox Searchlight. His responsibilities included such mundane tasks as filing, getting signatures, and handling petty cash.

The work provided little educational value for Glatt, but good value to Fox Searchlight, since these tasks needed to be done.

And therein lays the rub.

The court found that Fox Searchlight failed the criteria employers must meet in order to have unpaid interns. If not met, interns must be paid minimum wage or better.

These criteria are meted out in a 6-part test the Labor Department issued as guidelines for employers:

The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment;

The internship experience is for the benefit of the intern;

The intern does not displace regular employees, but works under close supervision of existing staff;

The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded;

The intern is not necessarily entitled to a job at the conclusion of the internship; and

The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship.

It can all be boiled down to a single basic rule of thumb:

Interns are there for educational training, and not to benefit an employer with free labor.

Fox Searchlight was found to have violated the 6-part test because Glatt and the other interns received little training, but performed valuable tasks for the business.

"They worked as paid employees work, providing an immediate advantage to their employer and performing low-level tasks not requiring specialized training. The benefits they may have received – such as knowledge of how a production or accounting office functions or references for future jobs – are the results of simply having worked as any other employee works, not of internships designed to be uniquely educational to the interns and of little utility to the employer. They received nothing approximating the education they would receive in an academic setting or vocational school."

Fox Searchlight isn't alone in having its wrist slapped.

Since the ruling, New York employment lawyers are filing lawsuits in spades over unpaid internships, and many are coming out on top. Intern exploitation seems to have been running rampant, particularly in media companies.

Of course, not all internships lead to intern abuse –

When handled fairly, an intern-employer relationship can be a mutual boon.

Many people are perceptively willing to forego pay in exchange for experience, networking, and to get a foot in the door.

At the same time, businesses have natural incentives to run a low-cost operation as possible. Taking on interns is a great way to have eager gophers in exchange for a little tutelage time.

But when a business takes advantage of its interns, the balance gets thrown off.

And that's been happening more and more.

With unemployment running at a high rate over the past few years, the temptation to exploit interns is all too great.

In the past, there was always the very sensible argument that, "Hey, if you think you're being taken advantage of, just quit! It's not like you're getting paid anyway!"

The business would lose out on a potentially great intern, and would have to expend further resources to find a replacement. It would, in a sense, be "punished" if it failed to make the internship experience worthwhile.

But now, the economic game has changed.

Having a constant, desperate pool of unemployed people available affords businesses a steady flow of free labor.

When one intern quits, a thousand are lined up to replace him or her.

The employer has zero incentive to add value to an intern's experience, and all the incentive in the world to bleed that intern dry for as much work as possible.

My hope is that the Fox Searchlight case will remind employers of the ground rules, and help guard the balance of benefits for both sides of the internship relationship.

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